Bernanke warns Congress on debt default as China expresses alarm

Pressure on the US to agree a deal to raise its $14.3 trillion (£8.6 trillion)
debt ceiling has intensified, with Federal Reserve chairman Ben Bernanke
warning that failure to reach an agreement would be a “self-inflicted wound”
and China – America’s largest foreign creditor – sounding the alarm over the
situation.

Mr Bernanke told Congress the political battle over raising the debt ceiling, less than three weeks before America’s spending commitments could force it into default, was endangering its top-rated credit reputation.

“This is a tremendous asset of the US – the quality and reputation of our Treasury securities – and we benefit from it with low interest rates. I would urge Congress to take every step possible to avoid defaulting on the debt or creating even any significant probability of defaulting on the debt.”

Mr Bernanke said a debt default would provoke a major economic crisis and risk a second recession.